Early Look

Monday, July 13, 2020

Stock futures are pointing to a higher open, with technology shares on track for yet another record high after an M&A deal in the semiconductor chip sector (ADI acquires MXIM) boost sentiment for the high-flying sector, adding to last Friday’s closing high (third straight record in a row for the NASDAQ and its 27th of 2020). The Dow closed higher Friday on COVID treatment optimism but reports over the weekend showing another surge in several states (Florida topped over 15K new cases Sunday) keeps sentiment at bay. Last week, the Dow finished 1% higher, the S&P 500 booked a gain of 1.8%, and the Nasdaq Composite advanced 4%. In Asian markets, The Nikkei Index jumped 493 points (2.22%) to 22,784, the Shanghai Index jumped about 60 points (1.77%) to 3,443 and the Hang Seng Index rose 44 points to 25,772. In Europe, the German DAX is up over 100-points to 12,750, while the FTSE 100 is higher by 50 points to 6,150. Attention this week turn to earnings, led by big bank results over the next week, while beverage giant Pepsi (PEP) reports a beat on the top and bottom line this morning. This week will also bring key economic data, including U.S. retail sales and Chinese trade and economic-growth data for Q2. Rising coronavirus cases over the last few weeks has done nothing to dent market optimism, as stocks continue to push to new all-time records.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 32.99 points, or 1.05%, to 3,185.04

·     The Dow Jones Industrial Average rose 369.21 points, or 1.44%, to 26,075.30

·     The Nasdaq Composite gained 69.69 points, or 0.66%, to 10,617.44

·     The Russell 2000 Index advanced 23.76 points, or 1.70% to 1,422.68

Economic Calendar for Today

·     2:00 PM EST                      Monthly Budget Statement for June

World News

·     The number of confirmed cases of the coronavirus illness COVID-19 worldwide rose to 12.5 million on Saturday, with the U.S. accounting for about a quarter of that tally and the U.S. death toll rising again after a surge in infections in states in the South and West. The U.S. saw a record of more than 66,000 new infections on Friday, according to data aggregated by Johns Hopkins University. Thirty-nine states have seen a rise in cases in the last 14 days,

·     Florida reported more than 15,000 new daily coronavirus cases on Sunday. The Florida Department of Health said that 15,299 new infections occurred since Saturday, its highest single day count ever.

Sector News Breakdown

Consumer

·     PepsiCo (PEP) Q2 core EPS $1.32 on revs $15.95B vs. est. $1.25 and $15.38B; continues to see FY20 core effective tax rate of approx. 21%; reports organic revenue declined 0.3% in Q2; believes it has ample liquidity and flexibility to meet business needs and return cash to shareholders.

·     Tesla (TSLA) said the starting price for the Model Y crossover is now $49,990 (before taxes and incentives), marking the second significant price cut it has made to its vehicles in the last six weeks. In late May it cut $5,000 off the Model S and X and $2,000 off the Model 3

·     Yeti (YETI), the RealReal (REAL), and Nordstrom (JWN) are among the companies successfully connecting with customers in the virtual realm, according to Barron’s this weekend. Yeti partners with musicians and athletes to create a robust social-media presence. The RealReal, which trades at just 3.9 times sales, has been doing online consultation, and sales per share are expected to expand to 6.2 times by 2022. Department store operator Nordstrom has long had one of the best omnichannel platforms among peers

Energy, Industrials and Materials

·     An alliance of crude producers led by Saudi Arabia is pushing OPEC and its allies to increase oil production starting in August, officials in the group said. Key members of OPEC+ are set to meet via web conference Wednesday to debate the group’s current and future production. Now Saudi Arabia and most participants in the coalition support a loosening of the curbs, the delegates said

·     Kirby (KEX) said it will restate previously issued financial statements for Q1 2020 to correct a goodwill impairment charge; says its Q1 non-cash non-recurring goodwill impairment charge was understated by ~$127.9M pre-tax (~$98.7M after-taxes), or a loss of $1.65 per share

·     Exxon Mobil (XOM) resumed drilling in Guyana last month, underscoring its dedication to the offshore hotspot despite oil prices and a messy turn in local politics

·     Corteva (CTVA), CF Industries (CF) and Nutrien (NTR) were all upgraded to Buy from Underperform at Bank America

·     Deere (DE) upgraded to Outperform from Neutral at Baird

Financials

·     Artisan Partners Asset Management Inc. (APAM) reported that its assets under management as of June 30, 2020 totaled $120.6 billion. Separate accounts accounted for $64.0 billion of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $56.6 billion

·     Moelis (MC) downgraded to neutral from buy at Goldman Sachs saying the firm will probably keep investing for longer-term growth through what’s likely to be a weak cycle, contributing to short-term margin pressures

·     SuRo Capital (SSSS) positive mention in Barron’s noting to buy Palantir ahead of a likely IPO, investors can bet on this Nasdaq-listed business development company that invests in pre-IPO tech stock

·     Universal Insurance Holdings Inc. (UVE) estimated incurred weather events above plan during q2 end of about $17M pre-tax

Healthcare

·     Amgen (AMGN) invests an additional amount of ~$421M in BeiGene’s (BGNE) registered direct offering of ordinary shares, which maintains Amgen’s current pro rata ownership of BeiGene at ~20.3%

·     HCA Healthcare (HCA) downgraded to Market Perform from Outperform at BMO Capital

·     Genentech, a member of the Roche Group (RHHBY), announced results from the second interim analysis of the Phase IIIb STASEY study, which reinforce the safety profile of Hemlibra characterized in the Phase III HAVEN clinical program

·     Innovation Pharmaceuticals (IPIX) filed for a $60M mixed shelf offering.

·     Stoke Therapeutics (STOK) filed for a $400M mixed shelf offering.

·     Xeris Pharmaceuticals (XERS) shares rose late Friday after a disclosure by Soros Fund Management, LLC of a 5.3% stake of ~2.5M common shares.

Technology, Media & Telecom

·     Analog Devices Inc. (ADI) agreed to acquire Maxim Integrated Products Inc. (MXIM) where ADI shareholders will own 69% of the new entity, while Maxim shareholders own the remaining 31%. The combined entity is expected to have revenue of $8.2 billion and free cash flow of $2.7 billion on a pro forma basis. https://on.mktw.net/3iWWxjk

·     ADI raised its Q3 guidance, saying it now expects revenue of about $1.45 billion, plus or minus $30 million compared to prior view of $1.32 billion, plus or minus $70 million provided on May 20

·     Nokia’s (NOK) can benefit from Huawei’s woes according to Barron’s, and some form of U.S. government help could be in the offering. It also noted its hardware is catching up to that from its 5G competitors, citing Raymond James analyst who sees opportunity in overhaul of mgmt.

·     AMC Entertainment (AMC) and bondholders agreed to a debt overhaul that provides cash and time to repay its borrowings while it tries to withstand the shuttering of its movie theaters